#01: Unlocking The Next Big Thing In The Marketplace

The past 30 years have been phenomenal for marketplace businesses. The number of services going online is exploding, with no signs of slowing down. Marketplace startups have been going through quite a number of evolutions since they first appeared in the early 1990s, widely known from the popular thick Yellow Pages searching directory that was largely treated as a go-to for anything related to information about local businesses. However, flipping through the directory and browsing the results that contain thousands of pages, with the hope you’ll find something nearby, is a pain in the neck.

Fast forward 30 years, these directories are disappearing and thanks to Mr. Google for playing a pivotal role in this process. It is undeniable that Google has been a search engine for almost everything we want. However, when it comes to a better local discovery experience, they’re better players in the space.

In this article, we’ll explore:

  • The transformation in the marketplace activity

  • What’s waiting ahead for the next big thing in the marketplace?

The transformation in the marketplace activity

The below chart represents the transformation era of marketplace activity from the 1990s up till today.

The 1990s:

This is an arguable integral moment of shifting offline service online, which back then popularized by the likes of Craiglist and Yellow Pages (initially existed in an offline form before it went digital in 1996), and also served the very key moment of what’s now an everyday activity; selling online. The focus here was given to the demand side, where users have the ability to select what services they would like to have. However, the downside of this model is the silo process. You purchase what you want, but the process along the way like reviews and checkout, all done by yourself.

The 2000s:

The unmanaged vertical of Craiglist has now been unbundled with focus into sub-vertical specific (ie: jobs, gigs, discussion).

The lack during the listings era has now improved with “tech-feature” enhancement with the appearance of cut-and-dried information that improves the customer experience while browsing for needed items or services. Taking Yelp as an example, where they outstrip Craiglist in terms of content discovery. With Yelp, users can now go through the reviews rated by previous users before making any decisions. However, the users would need to reach out manually to the providers to make a booking.

The late 2000s — mid 2010s:

The rise of mobile adoption has accelerated on-demand services which have now been part of our daily lives. Also known as the “Uber for X” era, these platforms typically provide a full-stack experience for both supply and demand sides. Unlike the incumbents, they now have the capability to be data-driven by collecting actions that take place within the platform to manage the liquidity of one category better.

Taking the taxi industry as an example. Remember how difficult it was years ago when we wanted to grab a taxi to meet our long-lost friend? Waiting at the side of the road while hoping that there’s one that comes by, or the next best bet is to call the number of a specific business, which has minimal availability and frequently highly variable consistency, and to arrange to get picked up with them.

Uber has managed to overcome those challenges by simply becoming a platform that matches both users and drivers with just a few clicks. Additionally, Uber’s model has topped the incumbents in regards to a more seamless UX pathway. Compared to the previous type of marketplaces, now it:

  • Has a standardized trust mechanism where these mechanisms can come in various forms such as driver authentication or even guarantees provided by the service providers, shall unwanted things happen.

If you meet a stranger and know nothing about him or her, trust takes time to develop. But if you have a digital system that gives you a bunch of info about the authenticity of that stranger, trust can be gained instantly.

- Arun Sundararajan, author of The Sharing Economy

  • Can handle price setting in a more efficient way through the aggregation of supply and demand which in return helps to create better use of existing unutilized assets and infrastructure at scale. Uber has long leveraged on its ability to create an exponential network effect curve and in fact, has been stated clearly in their S-1.

The mid-2010s till now:

Establishing trust and safety between supply and demand has always been the number one priority of the marketplace model. Over the years we have seen how companies leveraged the technology to improve scrutiny around marketplace safety (Uber — pre-vetted drivers; Yelp — filtration of contents/reviews).

This is where the concept of “managed marketplace” becomes more popular as it provides an end-to-end experience of building trust as compared to the traditional P2P marketplace and brick and mortar. Essentially, there are 2 versions of the managed marketplace model, namely the “lightly” and “fully” managed.

A lightly managed marketplace typically can be found in on-demand companies like food delivery ( ex: DoorDash, Uber Eats, Deliveroo) and ridesharing (ex: Grab, Uber, Cabify) where the cost adheres to a very minimal part of the company’s overall operating cost structure. Taking the example of Grab, those light costs may include background checks for both passengers and drivers as well as verifying reviews.

Commonly, companies with a fully managed marketplace model will cohere the following traits (along with an example):

  • Value-added: taking on works like distinguishing high-quality providers, standardizing prices, or automating matching between demand and supply. Skilledd helps to identify and reduce the hiring time for employers. Generally, hiring tech talents is hard and painstaking. For every talent hired approximately a result of XX man-hours spent on screening candidates, checking through dozens of technical assessments, fit-interviews, and the worst part; a drop in productivity time.

  • Establishment of added risk into the model: they take on the extra work in order to create trust. Instead of just matching based on keywords, candidates will undergo various processes to uphold the quality. Candidates with profiles that match a job opening will be asked to undergo a video/audio interview with Skilledd’s Talent Assessors, where they’re profiled even further on their communication skills, culture-fit preferences and technical understanding and skills.

  • Premium take-rate: this is to compensate with the premium service level or risk transfer that has occurred. Skilledd only charges a fee on the successful engagement of the candidate and 1 calendar month after the candidate begins work for them. The pricing fee model might be slightly higher compared to hiring through the SaaS-based recruitment platform. However, given that they’re the one that manages the end-to-end vetting process and thinks of it as “GCP for Recruitment’’ where companies can scale as they would within their own underpinning needs, what else could be the better counter for this?

Another quick example of a fully managed marketplace would be Dahmakan, a Malaysian-based full-stack food delivery startup that raised Series B a couple of months back. With over 2000+ listing dishes in its database, it runs as an operating system that covers almost every phase of its operations, from recipe development to last-mile delivery, in contrast to the “lightly” managed food delivery marketplace companies that do not own or handle the food preparation themselves.

What’s waiting ahead for the next big thing in the marketplace?

The marketplace that redefining the future of work.

The last decade saw a change in the workplace. What the public is now interpreting as a ‘work’ has shifted beyond the dictionary understanding. The rise of “Uber for X” has created countless job opportunities by allowing people to monetize their time in services. Despite the saying that they would “be their own boss”, yet the truth was that freelancers exchanging time for money in the competitive ‘gig economy’ is bound to hours sheets. This has led to the origination of new digital platforms that emphasize trading individuality as the commodity, where the user’s expertise now becomes the core asset.

An example of platforms that have shifted the power dynamic back in favor of the creators is Patreon, one of the earliest creator platforms where creators can directly earn their income from fans, has seen significant growth of over 30k new sign-ups in the first three weeks of March this year alone.

Asymmetrically, Substack has around 100k paying subscribers with their 12 top-earning writers making an average of more than USD160k each. Generally, there’re a few similarities shared between these platforms such as:

  • Individuality as a fundamental feature. The central attention now is being given to what the creators could offer on the table. Take Patreon, where creators build their content and monetize it through a tier-based subscription model. On the platform, they can personally define the price for the content that they design. Contrary to conventional creator platforms like Youtube, platforms like Patreon is a great powerful choice where they can now get paid directly for the value they’re giving to their fans.

  • Allowing for a new mode of work. Want to be a podcaster? Anchor has the tool that you need. Starting a newsletter business? Substack has what it takes. Selling your new crash course on how to become a great UI/UX designer? Fret not! Podia got your back. With a passionate economy, individuals, no matter how niche, can now effectively monetize their passions and skills. The best part about it, they can now make a living with only “1000/100 true fans”.

  • Supported by integrated tools. In the creator stack, new platforms are often monetized through SaaS fees that increase as clients grow. Podia is a great example of how they make it hassle-free for creators to acquire users, manage payment and sell products through behind-the-scenes support. Instead of going back and forth, everything is now accessible within a single platform.

Geeks of the Valley brings together thought leaders, entrepreneurs, and industry experts to dissect future trends. If you are an investor, founder or would like to work together, please reach out to geeks@geeksofthevalley.com or any of us here.

Written by Aizuddin and edited by Roshan